Finance Minister Nirmala Sitaraman said a debate on cutting the 12.5% Long-Term Capital Gains tax is healthy. As foreign investors exit Indian stocks, many hope tax cuts will bring them back. Vivek Kaul explores if these changes could boost your SIP returns in the latest episode of Pocket Money today.
In this episode, Vivek Kaul examines why foreign investors are exiting Indian stocks, whether cutting the 12.5% LTCG tax could bring them back, and what it means for your SIP returns.
Finance Minister Nirmala Sitaraman has blamed the mass exit of foreign investors from Indian stocks on "ease of liquidity, ease of availability" - presumably referring to the money pouring into the markets from domestic retail investors.
Secondly, on the question of tax cuts on capital gains, while remaining noncommittal, she has said that it's a "healthy debate to have", sparking a growing climate of anticipation around possible cuts in Long-Term Capital Gains (LTCG) tax (which is currently 12.5%) in the forthcoming Budget.
The OPM-wallahs, however, seem convinced that reducing, or abolishing, the Long-Term Capital Gains tax of 12.5% is the silver bullet that could bring back foreign portfolio investors, and revive Indian stocks.
However, are taxes the main reason foreign portfolio investors have been exiting Indian stocks? What if lowering capital gains tax has the opposite effect - of encouraging them to sell more? What are the chances that tax cuts would revive your SIP returns? Vivek Kaul has some answers.